Power Lunch - Mixed Signals, and Tim Cook’s China Trip 3/27/23

Episode Date: March 27, 2023

We’re getting some mixed signals on what could happen next in the banking crisis. We’ll look at one positive development, but also the area many are looking at as the next trouble spot. Plus, Tim Cook visited China, and got welcomed with applause. But with the TikTok CEO getting grilled over its ties to Beijing, is there a double standard? We’ll discuss. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon. Welcome to a busy Monday on Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Coming up, mixed signals on what happens next in the banking crisis. We'll look at one positive development, but also the area many are looking to as the next trouble spot. Plus, Tim Cook visits China and is welcomed with applause. He praises the country for its innovation. But with TikTok CEO getting grilled over his ties to China, does Apple get a free pass? First, let's check on markets with stocks slightly higher right now. The S&P hanging on to a 10-point gain the NASDAQ down about half a percent. Let's get to some of the individual stocks that are on the mule at this hour.

Dom Chu and Christina Parsons-Evelas covering that for us. Dom, take it away. I'm going to start with the banks. Shocking, I know, but the headlines this weekend are really big. Let's talk about First Citizens Bank shares, a North Carolina company, a bank that a lot of people haven't heard about, but they know about it today because they're the ones who have now going to take over Silicon Valley Bank, a substantial number of their assets and loans. because of that, we've hit a 52-week high in those shares, still up about 52% near session high. So Silicon Valley Bank is now going to be enveloped by First Citizens out of North Carolina. Big move there for that particular stock.

Let's talk about the other regional banks. First Republic, you can see they're up about 10% right now, Pac West up 2.5%. 4% for Western Alliance. These are some of those West Coast regional banks that got caught up in the failure of Silicon Valley Bank. even Charles Schwab, broker-dealer slash bank holding companies, up about 2.5%. But remember, First Republic has still lost around 90% of its value since about no, call it February. If you look at the regional bank stocks and ETFs that track some of those moves, remember the Spider Regional Bank ETF, ticker KRE, has now lost about 30% of its value

since that kind of February high that you're seeing right here. So keep an eye, still a long way to go. And the major U.S. banks, guys, take a look at these. J.P. Morgan Chase, Bank of America, City Group, Wells Fargan. are still generally positive on the session, although losing just a little bit of steam intraday right now. For more on what else is happening, let's go out to the NASDAQ where Christina Parts of Nevelas is standing by.

Christina. Thank you, Dom. Well, the crypto crackdown continues. Today, the Commodity Futures and Trading Commission filed a complaint against crypto exchange by Binance causing crypto exchange Coinbase to fall in sympathy. Right now, shares are over 10% lower. This is after the stock already fell 10% last week after the SEC issued a Wells. notice that it plans to file a lawsuit against coin over securities law. But the stock, though,

if we zoom out, still 3% higher on the month. Shares of Roku are up about 5% right now after a Sasquahana upgrade. Roku, which we know makes streaming devices and software. And the analyst argues the bottom is in and that connected TV markets will only continue to grow. The stock is having its best quarter since Q4 2020, but is still 55% off its recent high. Lastly, shares, of Carnival Cruise Line are falling right now over 5.5% reversing earlier gains that we saw this morning. The company did post a smaller than expected loss for Q1 and a big jump in bookings, but investors are more concerned about the weak outlook for this current quarter that's happening right now and full year losses. Ty?

Christina, thanks. Great to have you back. News alert from the FDIC on the banking industry, and Steve Leesman has it. Steve. Tyler, thanks very much. The FDIC chair, in testimony he'll deliver tomorrow to Senate banking. While he says the financial system is sound, he says it continues to face significant downside risks. And those risks come from inflation. Importantly, he says they come from rising interest rates as well as geopolitical uncertainties. He says credit quality and profitability could weaken at banks due to these risks. As well, banks could tighten their loan underwriting standards and slow loan growth. Makes a point of saying more

interest rate hikes could heighten unrealized losses at the bank. So here's the FDIC chair, kind of talking through the Senate banking to the Federal Reserve. Some banks have been reporting moderate decline in deposits, he says, but the vast majority say there's been no material outflows. He also says the banks are prepared to access discount window and bank term funding program lending as needed to meet their liquidity needs. Banks, he said, responded to zero interest rates by quote, reaching for yield. What's important about this section is he's kind of, again, pointing to the Fed's monetary policy as part of the problem at the banks. Michael Barr, the vice chair at the Fed for bank supervision, didn't do that in his testimony. He says, regulators should review

capital liquidity and interest rate risk supervision at banks with assets of $100 billion or more. Regulators, he said, should review the method for resolving banks of that size. So, Tyler, as I reported earlier today, there's some question about whether or not. the Fed is thinking enough about the impact of the banks of its monetary policy and whether supervision is kind of like a poor relation to monetary policy at the Fed. The FDIC chair raising some questions about the impact of Fed monetary policy on the banks and why we are where we are right now. And very interestingly, that phrase in there that the banks were reaching for yield.

Right. Usually when you do that, it doesn't end well. No, and it hasn't. And sometimes, Tyler, I remember from the 2000. crisis, sometimes people lost everything when they were reaching for an extra quarter or half point. The FDIC chair points out that the period of zero interest rates that followed the pandemic caused banks to take certain actions, and then those actions had to be reversed when the Fed started hiking aggressively. And remember, Tyler, only one Fed official dissented during that aggressive rate hike

period, which was Esther George from the Kansas City Fed who was no longer at the Fed. and among the reasons she dissented was her concern about the banking industry. All right. Steve Leasman, thanks very much. Moving on now after weeks of fallout and uncertainty in the banking system and space, Silicon Valley Bank, SVB, finally has a buyer, but let's start with how we got here. About two weeks ago, Silicon Valley Bank, over-exposed to bonds, short of funds, and experiencing a surge of withdrawals, collapses, bluey, gone. The Fed backstops deposits.

the FDIC closes the bank, transfers all assets to the Silicon Valley so-called Bridge Bank, and now the FDIC accepts an offer from First Citizens Bank and North Carolina institution to purchase about $72 billion of SVB's assets at a discount of $16.5 billion. For more on the details, let's bring in Hugh Sun. He is CNBC.com's banking reporter.

Hugh, how and why did First Citizens get SVB, and were there other bidders in the process? There were other bidders. Bloomberg reporting on Friday that Valley National was another player, another smaller regional player in this. The sense is we didn't get there was an overwhelming rush of demand for this auction and that actually, you know, there were a few, you know, auctions, you know, in the pipe. So First Republic is another ailing lender that had to be eventually, has to eventually either get capital infusion or sold. And so my understanding is that there are a few bidders out there who actually

wanted to wait for and bid on First Republic because they found that preferential versus SVB, you know, on, let's just take a step back and finally say, however, it is good that this auction got done, even at the price that it did. And, you know, and there was a raft of concessions that FDIC needed to make, to get this deal done. And I think that's what it shows. How big is First Citizens? And obviously, we can look at the stock reaction of First Citizens. It is way up today. How big is that company? I mean, in a way, that tells you everything you need to know, because, you know, they got a raft of concessions. They got to cherry-pick assets.

They don't have to take 90 billion of these long-dated bonds that the Fed is holding onto. They got a law-sharing agreement in a discount on the loans they did get. There are other aspects of this that were still reporting out. And, you know, it's a top 40 bank that's now a top 20-20 or 25 bank. They are really in the big leagues now with this deal. And so kudos to them and what they accomplished. Are they going to do a name change or anything?

There's been a lot of kind of sass about the fact that this, you know, stay-and-sounding North Carolina institution is now the place where all of these kind of startup people have to have to do their banking. I mean, in all seriousness, do you think there's a risk of further deposit flight or is First Citizens going to make an effort to say, no, the culture of SVB that, as Deirdre talks about, that you might have liked and enjoyed, we're going to try to keep that culture. I'm just curious. Look, they've made sounds about wanting to cater to the VC community and cater to the folks

that were SVB's bread and butter. You know, is there risk of deposit flight? I think there must be because as part of this deal, they actually got a rather large credit line that is, you know, created to help deal with the potential flight of further deposits. You know, the issue being is a lot of these are still over the 250 FDIC cap.

So when these businesses and VCs bank with them, they have way too much to be covered. Final point on that. Is it clear whether those uninsured deposits are now protected because the FDIC's press release made it sound like only the existing 250K cap would still apply to all of those deposits. You know, it's unclear because, you know, on Sunday, March 12th, when they announced that these depositors would be made whole, you know, is there a time limit on that? With this new entity, you know, is that now elapsed? And, you know, it's unclear.

Yeah. And I think that's some of the uncertainty that that's why they created that special credit line for first citizens to have. Yeah, great point. In other words, that the FDIC was going to cover those uninsured deposits. for the time being, but now that clock may have expired? Is that the idea? Yeah, that is possible. And I only say that just because why else would they create this special credit line

in anticipation of potential deposit flight? And so that's certainly a concern here. I don't want to get ahead of our skis here, but that's a risk. Yeah, no, it's well said, and hopefully we'll find out more in the next couple of days with more of these regulators on Capitol Hill. Hugh, thanks for now, Hugh Sun. If the slowdown and withdrawals from smaller banks represents a good sign in this crisis, let's look at a potential further trouble spot for regional banks, which of course is the

commercial real estate market office in particular, where values have been falling. Diana Oleg is here with the latest. Diana? Well, Kelly, most commercial real estate has dropped in value simply because higher interest rates make borrowing costs higher, thereby limiting investors' ability to make deals. The expectation is that value will drop further, and that, of course, hits the banks. FDIC insured banks hold the largest share of CRE mortgages at 39% or $1.7 trillion. 13% is held in CMBS. Now, about 70% of this is held at regional and community banks.

This year and next, there is a huge pipeline of commercial mortgages hitting maturity that need to be refinanced. The biggest concern, of course, is office. Of the $270 billion of bank-held CRE loans maturing this year, about 80 billion or 30% are in. office properties. That's according to TREP. So property owners who need to refy are up against higher borrowing costs and lower property values. This as investors lose their appetites for real estate loans. Now deal making, I'm told, has essentially ground to a halt in the CMBS market is largely shut down due to lower values and fear of more bank failures. Experts tell me there is no capital out there for office. Back to you guys. Wow. Diana, thank you. Our next guest

also concerned about this area, warning commercial real estate. estate in office in particular could be the next shoe to drop. Greg Zuckerman is a special writer at the Wall Street Journal. Greg, it's good to see you. The only thing that I can hope here is that there's way more due diligence being done than perhaps there was for the other loss in those issues. But when I actually asked a friend of mine on Wall Street, okay, if we have all these losses on office, what should these banks do? He said, I don't know. They can't really hedge it. You know, if you sell it, you realize the losses, which itself becomes a problem and perpetuates the cycle. if they, maybe they raise cash, that destroys profitability in the long run. So, you know, yes,

it's a no known, but it's not clear there's a lot that vulnerable banks can do about it. Yeah. So some veterans like Steve earlier and yourselves, we think about 2008. In 2008, we said, yeah, there's some issues with housing and some concerns on the part of banks and others, but it's probably baked in. That's what a lot of the bulls said. And then it was a realization that there were concerns. Similarly, now we're looking at interest at risks at all kinds of institutions, and in particular commercial real estate. The issue is you've got two big lenders, signature and SVB. They're out of the market, higher rates. People have leases coming due, and people are realizing they don't need as much space as they had expected or they had needed

a few years ago. So is that the next shoot-a-drop? And that's what kind of savvy investors are looking at the banks, where the exposure is. And it's a real concern. You may end up with rising vacancies, but as Diana pointed out, you are going to end up with rising refinancing issues. How are our lenders going to confront that? Are they going to be able to? And then in the secondary market, will there be enough investors to buy packaged loans to keep this whole machine running? Well, the markets that we're looking at, a number of us, to kind of see where things are going, is the debt market. And how open it is for, for, for, for lenders and for borrowers and investors. And right now, there's concern. We haven't had the investment

grade rated bond deal in over a week. Junk bond spreads are wider. They're not at levels where it suggests real credit risk. But you do get concerned in terms of the impact for the overall market if it goes from an interest rate risk to kind of credit risk. So there's some names, Greg. You know, analysts always kind of look and say, okay, who has the biggest exposure in terms of their loan book to office in particular here. I think Bank of Marin is one of the names that comes up a lot, Bank of the Ozarks, Amkul, which was recently a takeover, I think, by... Interesting that on March 1st, these two companies, which both have a significant amount of office exposure merged. So, you know, does that fact make it less likely that there's going to be a shoe to drop here

that everyone can kind of pour over this and presumably executives and all the rest of it are thinking through what to do about this exposure and how to manage it? Yeah, I think so. A lot of stuff is priced. in. We've been talking about it. It's not a shock to a lot of investors. And yet, I do think the analogy is 2008. It's not exactly like 2008. There are different risks. But if you remember, it took about a year for some of those risks to flow through the system. And I believe that we're going to have about a year or so of concerns that maybe it's a bank or a broker one week and insurance company or a different type of institution the next week. And the issue isn't necessarily

just stabilizing the system. Hopefully we can do that, but it's the impact on the overall economy. So if you get lending, that's pressured. You get investors getting kind of concerned. Yeah, maybe the financial system stays stable and we're all hoping and our fingers crossed and so far, so good. I mean, the market is up for the year, which is great. And economy looks pretty strong on employment. It's great. But you do wonder on the, about the impacts. And already you're saying in terms of the startup world, we did a really good story, I think, today about how the impact of SVB is already impacting the startup lending and those kind of companies, the tech world. So you do worry about the economic impact as sort of the next domino here.

Oh, yeah, even with that Caterpillar and United Rentals downgrade today. Take us through a couple of the numbers that might come to mind on how exposed some of the regional and mid-sized banks are to these commercial real estate loans. Well, it's commercial real estate, but it's also just the general idea of hold to maturity. And frankly, you don't really worry about these things. Just like SVB, we know it was a concern that they were holding kind of long-term debt. But it was when there was a hole in the balance sheet and it forces them to sell the people that get exposed. And investors start seizing and focusing on it.

There are all kinds of names that people are sending me, emailing, oh, you got to look at this one. You got to look at that one that are big names. I don't even want to mention them, frankly. It's an environment where you want to be a little bit careful about just kind of spreading concerns and rumors kind of thing. But it's the kind of thing where savvy, sophisticated investors are pouring over the balance sheets and seeing the kind of concerns and focusing kind of concerns that even just a few weeks ago, they weren't. You bet the risk officers, whether it's a bank or an insurance company or an endowment fund, they are digging through their portfolios to see what their risk exposure is.

Go ahead, finish. And what we've learned from SVB is sometimes it comes a little too late for those guys. Yeah. Greg, always good to see you, Greg Zuckerman, Wall Street Journal. Good seeing you guys. Coming out, Elon Musk, yes, you've heard of him. He says Twitter is now worth less than half what he paid for it. And one of his key revenue raising plans seems to be backfire. We will explain that. And oil rising today, lifting energy stocks, but Nat gas down again, barely above $2 and on pace for its worst quarter since NatGas futures trading began. Those details are ahead on power. Welcome back to Power Lunch. It's time for tech check. And we've got a bunch of tech.

to check with Deerja Bosa today. Starting with Twitter where Elon Musk is claiming to have lost more than $20 billion already on his investment, but users may be losing something even more valuable, that blue checkmark. Deirdre, let's start there. And is this the way he's going to try to jumpstart the valuation growth to $250 billion that he's kind of promised? That's right. That says where he says where Twitter could be in a few years from now.

Of course, it's later's valuation, $20 billion. So far cry from that. In terms of that blue checkmark, it's the legacy blue checkmark, right? It's you and I, organizations, people who got that checkmark for free. And this is sort of indicative of where he's trying to turn the platform. It's not for us, really, anymore. It's for mainstream users. I was listening to a recent interview, guys, from Mr. Beast.

This is the influencer creator that has 140 million subscribers on YouTube, 20 million followers on TikTok. He was saying that he actually likes the blue checkmark that you can pay for it because that means his comments. He can sift through them. People who are going to pay for that checkmark are more likely to leave substantial comments, i.e. not be a bot. So I understand what he's trying to do here. But again, as you said, Kelly, $250 billion. Eventually, that is a steep price for Twitter, steep valuation, especially

considering where the rest of social media is like a snap at an $18.5 billion dollar valuation with many more daily active and monthly active users. Deirdre, what's your backup blue check plan? What are we all? What are you going to do? What are we supposed to do? Nothing? What are you going to do? I don't know. I just thought. I thought it today. I logged in and it said it's going away. I'm not sure. Am I supposed to care? Does it is, is it a problem? I don't know if we're supposed to care, but I don't. Sorry to say. Yeah. All right. I guess I would say that the whole problem goes away if you're not on Twitter. It does. Tyler's going to be right in the air. I'm not worried about this. Let's move on to AI, which is a topic de jour.

Reports out that Microsoft is concerned that other search engine providers like Yahoo and DuckDuck Go might be using Bing. search results to aid in creating or fortifying their own chatbots. Explain this. Okay, so this has to do with search engines, which is essentially a map of the internet that you can scan in real time. So obviously it's Bing and it's Google that have access to these that run these. And some of the smaller chatbots, like the ones you mentioned, duck, duck go, Yahoo, u.com, they use those search engines. Now, Google has more restrictions, so it's harder for them to do so. So then they go to Bing Microsoft. Now Microsoft is saying, hold on a second. We don't want to let all of our competitors have a leg up, even if they are

much smaller. So they're saying that it's going to be against the rules for them to do so. And I guess the bottom line here, guys, is that the AI race for search, it's on. It's on. We knew this. And we know that Microsoft wants to make Google dance. So they're going to be protective of what they have and what they're going to let others use, even their own customers. All right. Finally, we have to mention, Deirdre, this interesting. kind of like sentiment undercurrent that's going on with TikTok because after the CEO was on Capitol Hill and everyone said, you know, it was a terrible hearing for him and everyone piled on. It's obviously going to be banned. On TikTok itself, there's this kind of raft of people who are coming out in support of him, U.S. users. I mean, and they kind of imply that he's getting a bad deal and that, you know, Congress is out of touch. And I'm curious what that will mean for the actual potential crackdown of TikTok. I mean, this should have been evident before the hearing even started. And I think what's surprising is that there weren't some lawmakers who wanted to go out and be on the side of Shochoo.

Because, you know, obviously it is this huge phenomenon among a younger generation that is going to be voting in the next election. So there was a lot of influencers, a lot of supporters. Someone here even, I won't say who, said that their friend group was saying that, you know, he's kind of the celebrity now. People were talking about how charismatic you're looking at him right now that Show Chou is this, you know, this guy who's been able to defend Tickok not very well, but of course that goes back to the product and that the younger generation still loves it. The theory is maybe for Democrats in particular, Deirdre, because young voters are more of their base, that maybe they'll be, have a softer touch here, I don't know. And you've seen a few come out and say that, you know, it doesn't make sense or they're walking back a little bit or adding a little bit more nuance. All right. Deirdre, thank you so much.

Appreciate it today. Dear Jabosa for Tech Check. All righty, further ahead on the program while TikTok's CEO was grilled on Capitol Hill over the weekend, as we were just discussing, the company's China connection, over the company's China connection. Apple's CEO Tim Cook spent the weekend visiting Beijing, touting his company's relationship with China and facing no pressure from lawmakers, spurring new debates over the so-called double standard. First up, shelling out the Glock, Chipotle settling with union workers in Augusta for the tune of $240,000. We've got that story when we return on Power Lunch. Welcome back to Power Lunch. Let's get over to Kate Rogers for a market flash on Chipotle. Kate, it's great to see you again.

Welcome back. Kelly, thanks so much. Chipotle Workers United announcing this morning it settled with Chipotle for $240,000. This after the National Labor Relations Board found the company of, violated the National Labor Relations Act when it closed an Augusta main location as workers there sought to organize last year. Workers will receive pay based on their hours worked, pay rate and longevity prior to the store's closure. In response, Chipotle said in part, quote, we settled this case not because we did anything wrong, but because the time, energy, and cost to litigate would

have far outweighed the settlement agreement. We respect our employees' rights to organize under the National Labor Relations Act and are committed to ensuring a fair and just work environment that provides opportunities to all. So far, one Chipotle store in Michigan has organized successfully with the Teamsters Union. As you can see, the stock is higher by about 2% today. Back over to you, Tyler. All right, Kate, great to see you.

Kate Rogers, big jump in Treasury yields today. Let's get the explanation from Rick Centelli in Chicago. Rick. Yes, Tyler, big jump in all yields. We're up over 25 basis points in a two-year, and as you look at the intraday chart, you can clearly see right around one Eastern, a very soft two-year note auction, pushed yields up higher.

And this was at a time where, you know, there's a lot of nervousness out there, but nobody stepped up. That's interesting. And if you look at what's going on in twos in a bigger picture, after that big jump in yields, we are still hovering at areas we haven't been at since September. And if you look at the 10-year, well, it's the same scenario, except for on that other chart on the left, we started right around 3.5. That's how much they've moved today.

three months to tens of what everybody's paying attention to at minus 123 at six paces points away from its recent extremes. And I have a 40-year database and it's never been as inverted in my database as it is now. Kelly, back to you. Just incredible. After all we've been through, Rick, thank you. Oil rising today by more than 5 percent, the energy stocks too. This is a huge jump. Pippa Stevens.

What's driving? Yeah, it's a huge dump. It seems to be a mid-b broader sentiment in the market. But it definitely goes, and we've also had some disruptions out of Kurdistan, about 450,000 barrels per day. But it does seem to go beyond the supply and demand scenario. Rebecca Babin over at CIBC Private Well said that this has to do with negative gamma. It was in play on the way down, and now it's in play once again on the way up. So basically, dealers have to sell as crude went lower, and now they need to buy more as it goes higher.

And so those are exacerbating the price swings that we're seeing here. But energy stocks are solidly in the green. They are the best group today. But this volatility does remind me of one thing that Scott Sheffield's over at Pioneer Natural Resources said, which is that over the past two years, he hasn't seen generalist investors enter the energy space. And the number one reason for that is because of swings in commodity prices. And with oil going from, you know, 70 to 130, then to 60, now back to 72 in the span of a, you know, a year, it kind of just means that generalist investors are going to say, well, I don't want to bet on the direction of oil.

And so I don't really want to go into energy stocks. How about natural gas? Yeah, down big today. that contract does expire. The more actively traded May contract, holding up a little bit better as we head towards the Wednesday expiration. But this comes down to production. You know, simply put, production is a lot higher than last year. And we are seeing some slight response from producers, but not enough. You know, they create their budgets months, years out. And since the price decline has really been concentrated over the last three months,

not enough time yet to meaningfully adjust their production. All right. Pippa, thanks. Pippa Stevens. Let's get to Contessa Brewer now for a CNBC News update. Contessa. Tyler, thank you. And here's what we're looking at right now. A really rough scene in Nashville. We're getting new details about a school shooting that killed at least three students. And now we know that at least three adults have been killed as well by the shooter who's also dead. The shooter identified as a 28-year-old woman. She was armed with at least two assault rifles, we're told, and a handgun. It marks the third school shooting this year, according to NBC News.

President Biden has been briefed on the shooting, is in touch with the Justice Department. according to comments from press secretary Corrine Jean-Pierre a short time ago in her regular briefing to reporters, she said the president wants congressional Republicans to step up and support an assault weapons ban. Biden is expected to address the shooting in just a few minutes at a previously scheduled event. Lucid Motors is recalling about 600 of its air sedans over a defect that can result in the loss of power to the electric vehicle's motor. We'll follow that one for you. Tyler. All right, Contessa. Thanks very much. ahead on Power Lunch. The Dow rising near the highs of the day. But the NASDAQ is still in the red,

not much of a relief rally, I guess. A bad side for stocks? We'll explore that one and much more when Power Lunch. Welcome back to Power Lunch. Markets breathing a sigh of relief as we made it through the weekend without worse news for banks. Let's get to Bob Pisani. Bob, that said, it's not exactly a rip-woring relief rally for the regional banks here either. No, we've calmed down. The volumes are lower, which is good. The VIX has been moving down, which is good. But we kind of need a new paradigm here. So remember what's happened this month. Tech's been a big advanceer, banks, the big decliner. But yields have been moving up in the last couple days here. And tech is under a little bit of pressure, a little bit of pressure. And Viti, Microsoft, Apple, have been just gigantic movers this

month. They're up 8 to 15 percent. But that's looking like it's running out of steam. As Kelly mentioned, banks have been big losers, they're down 25, 30 percent, some of the big reasons. They're moving up today, but a lot of damage still being done. What we kind of need here is a new paradigm in a way. A lot of stuff in the middle has been languishing. So a lot of cyclical sectors, big industrials have had a terrible month. You know, Caterpillar, Cummins, Deer, Eaton, your usual big global names. They're all down 6 to 10 percent.

This sort of looks like we're languishing in recession fear land. Same thing with other cyclical names, material stocks, you know, your usual suspects here. suspects here, Mosaic, for example, or steel companies, new core, for example, down the same amount. This is not REITs. I mean, we're talking about very important parts of the overall stock market, the core of the stock market, what I call. So I think, Tyler, what we need here is we're going into the second quarter. We need to sort of get some kind of new idea going about where, what, if any, recession we're

going to be having. And I think the Bulls are really hoping a little bit of more stabilization in some of those cyclical names. Tyler, back to you. Thank you, Bob, very much. While stocks are trying to add to last week's gains, we're not seeing a big relief rally today, kind of iffy. The S&P Regional Bank Index up about 1% today,

but down close to 30% over the past month. So is the coast clear for banks, and what does it mean for the markets in the future? Let's talk markets with Lisa Erickson, head of the public markets group at U.S. Bank Wealth Management. Lisa, welcome. Good to have you with us. You are, in your words, cautious on U.S.

U.S. equities, why? What's the biggest factor making you so? We're really cautious on the back of some tough overall factors, both in the economy as well as what's going on policy-wise. So if we just break it down briefly, you know, when we look at our trend indicators both across the U.S. as well as globally, what we see is that activity definitely remains muted and we're not seeing much pickup month over month in trends. And in addition to that, while inflation has come down to some degree, it still is elevated. And so that's really leading us to that tough spot in terms of policy, where, again, Fed officials need to be biased towards tightening

and yet, you know, watching the impact on growth and, again, some of the financial stresses that we've had lately. If I, by your case and want to play cautiously in the markets today, what is a solid sound way to do that? Is it to go with defensive equities or is it to tilt more into T bills and treasuries? What's the more savvy way to do it? We're really recommending that clients look at a diversified source of cash flowing types of investments. So that would include just their ongoing solid commitment to fixed income where we have some very nice rates right now offering income.

And in addition to that, another category called real assets, which really represents, under underlying bets on both real estate as well as global infrastructure, sectors that offer very attractive dividend yield, and a lot of times more stable, ongoing income flows just because of the nature of their businesses. So Lisa, you don't think they're going to start cutting rates sooner, or it doesn't matter? So certainly in terms of what may happen in terms of rates, it definitely looks like we're closer to a pause or a pivot, certainly than we were months ago. And so within fixed income, what we really think that means is, while certainly we've got some very attractive rates on the

short end of the market, to not just stay too short, but really look at making a maturity structure more close to that of the benchmark so that if the Fed does, again, pause or pivot, you can capture some of that positive price action on the back of such an action. No, absolutely. It's short term looks great until all of a sudden your six-month T-bills mature and you can get half the rate that you once could. Lisa, thanks for joining us today. It's good to see you. Lisa, Erickson. Tim Cook, towing a fine line, visiting Beijing during a time when U.S.-China relations are on edge. We've got more details and we'll discuss that next.

And as we had to break throughout March, we're celebrating women's heritage, sharing the stories of women leaders in business and those of our CNBC teammates and contributors. Here's Rebecca Minkoff, fashion designer and female founder. collective. I always thought that someone else would notice something we needed. But what I realized is we have to demand what we need and we have to have a bit of fearlessness about it, even if we're scared, whether that's, you know, demanding a better work environment or a better pumping environment or equal pay for, you know, the same amount of work and experience. No one's going to do this for us. We have to be a little bit uncomfortable, stick our neckouts and truly fight for what we want and

band together with other women so that we can make it happen faster. Tim Cook making his first trip to China since the pandemic. He was one of several American business executives attending the China Development Forum. Meanwhile, Congress grilling the TikTok CEO over ties to China. Let's talk more about this with CNBC technology correspondent Steve Kovac. I guess some would say there's maybe a little bit of hypocrisy that Congress doesn't spank Tim Cook for doing a lot of business with China. And it is very inclined to spank TikTok over its ties to China.

Yeah, and exactly. They're not. Let's keep up the spanking metaphor here. So China's been spanking our apps and services for years now. They've been spanking our apps? Yeah, they've been spanking our apps. So you can't use Facebook in China. You can't.

So I guess the question we want to ask ourselves then is do we want to be like China and ban TikTok or is there another solution in middle ground? We're not even banning TikTok. It's not just Timu. What's the other one? They're the three of the top five. This would open the... Yeah.

It's not like we're not open for business or for Chinese technology. We can't even ban one of them. And don't forget three years ago, or two and a half years ago, WeChat was in the mix, too, as a talk. And that would be a huge hit because that's a way a lot of Chinese Americans

communicate with their friends and family back in China. That would be almost more significant of a hit than TikTok going away. WeChat is... You asked me too fast, but I forgot. Because WhatsApp is meta, but... Exactly. And WhatsApp's not there,

but it's... WeChat is basically their Facebook. This is a big question. How does Apple guarantee that the handsets that are made in China are safe and not? It's really funny. I was talking just about this. Because we talk so much, Tyler, about the software, right? But we don't talk a lot about the hardware.

There are processes throughout the supply chain so they can track each component and make sure it's in the right hands from the time it's, from the time the chip is spun up in the TSM, factor in Taiwan to the time that gets put into your iPhone. So they have processes and checks to to make sure that doesn't happen. So let's go back to the thing we started with, and that is Cook making his trip to China. Right. What was this development for him? How was he greeted all happy? What? All happy? Well, he went to the Beijing Apples for last Friday. We saw these pictures of people cheering and smiling. He does these photo ops anytime he goes. But our Eunice Union was actually at that conference in China behind closed doors. And he didn't do a keynote speech. What he did was Eunice described it as almost a TED talk about tech and education. And you cannot

think of anything more innocuous and safe for him to say in China. His goal to go there, Tyler, was to say nothing. Nothing that would anger. But he knows his appearance there itself is the most important thing. And the Chinese paint best that is a great victory. And they're using it as part of the propaganda campaign as she was talking about. And Eunice also mentioned that a lot fewer CEOs have up this year because they're a little bit concerned about the optics of it. U.S.-China relations aren't at a great point right now. It's all the more significant he would choose to go. And I don't know if it can't help but come off to the rest of us. Like they are extremely dependent on China right now because it serves the Chinese a lot more than it serves our interests.

Just look at their ballot sheet. Where their money comes from? 20% of their 117 billion in revenue in the holiday quarter came from China. Not to mention most of their phones are made there. But China needs them too. Tens of thousands of jobs every year are provided for manufacturing in China by Apple. So they kind of need each other at the same time. So if we want to get into, is there going to be a tit for tat? If the U.S. blocks TikTok, does that mean they're going to hurt Apple in some way? Probably not. They need Apple. They need those jobs. That's a huge stability for their growing middle class there. Absolutely. Spanking our apps. Yeah, spanking our apps. That's going to be a new way. I love that metaphor. I'm going to keep using it.

Still to come, we'll talk about Caterpillar's downgrade at Baird. Their slating slowdown in non-residential projects. There's also a bank stress angle to this. We've got that name and other key movers in three-stock lunch. It's time for three-stock lunch. And today we're sipping on some big analyst calls today, especially Caterpillar, which was downgraded to underperform at Baird, Roku higher after an upgrade at Susquehanna,

and Pinterest hire on an upgrade to buy at UBS. Here to help us trade all three is Ari Wald. He's managing director and chief market technician at Oppenheimer. Ari, good to see you again. Let's start with Caterpillar, a host of reasons cited for this one that aren't exactly encouraging

from a macro point of view and the stock's down 9% year to date. What would you do with that? Looking at the industrial sector on the whole, on an equal-weight basis, the sector is coming off a multi-decade relative highs. So there are some really exceptional strength in this sector that argued

that macro conditions were stronger than many have led onto. I'm not sure if those excesses have fully reset. for those reasons, I would be more selective on this pullback. Caterpillar is not necessarily the one I'd be keen on right here right now, but I would argue that correcting into the 200-day average, the tactical opportunities probably even to upgrade the stock. I know where I'm wrong, $212, that's a 200-day average, that's support, use that as your stop. I'd be looking to reduce on a bounce into $240

resistance. All right, let's move on to Roku. What do you think there? Yeah, so here's one that is now stabilizing following stark underperformance in 2022. To me, this is a beta trade. You got to buy it right, sell it right, use a tight stop. That sounds like a headache to me. So I don't have much conviction on this for the long term. Here are the levels to watch if you're fundamentally inclined above $67. That would be a breakout in the stock. That would put it above the 200-day average for the first time in over a year. Conversely, I break below $60. would be damaging and indicates some trading risk has risen. All right. So up 6% on this bounce today. And finally, we turn to Pinterest. Kind of same momentum here, Ari. What would you do?

Yeah, this one's farther along the basing processes, as we think about these names that have fallen sharply from their peak levels from 2021. I'd say at these levels, it's a little bit more difficult to manage risk. The stock has come into a test of its January peak, marking resistance at $29. The trend argues for a breakout over the coming days to even the coming months.

With that said, here's a stock that could trade all the way down to $23 and still uphold its 200-day average. So look to buy this one on a dip. All right. All right. Eric, thank you. Very, thank you very much. All righty, another potential downside of rapidly rising interest rates under the microscope. We'll tell us what that is and explored for us when we return.

Well, Americans are hunting for yield, but that could be hurting the economy. Dom Chu has the wise. All right. So, if you take a look at the overall picture for what we're seeing right now, there is this kind of view overall that if you look at deposits as a way to kind of talk a little bit about what's happening, it is a little bit curious to look at some of those moves. What we're going to show you right now is deposits as a share of GDP. And this is basically coming from Torsten Slocke, who's the chief economist over at Apollo Global, the president. private equity firm. And what he's pointing out is that red trend line. And what you're seeing in that red trend line is the overall move that we've seen in deposits as a percentage of GDP.

And if you look at it over time, it kind of follows that same line. Now, that spike that you're seeing right here is the pandemic when a lot of stimulus went into deposit accounts and you saw that kind of rise. And now we've drifted below that trend line. And what it might suggest, according to SLOC and perhaps others, is that you're seeing more people take money out of bank accounts and put them into money market funds as a way to kind of take advantage of what's happening right now with yields and for the perceived safety of those deposits

as opposed to being in bank accounts and rather in U.S. Treasury securities. If that were to play out, one of the things that he observes, Torses and Sloc, is that it might actually increase the marginal difficulty of consumer spending because it's not immediately liquid. You can go to a checking account and just use a debit card swipe and all of a sudden, you know, everything kind of happens. But overall, if you take a look at the picture for the reason why it matters is, is there

going to be a bigger slowdown in consumer spending, incrementally speaking over time, because people then have to move money out of, yes, money market accounts because they're mutual funds. You've got to put a sell order in there for them. It takes a few days to clear and everything else that happens. Does that kind of slow down or tap the brakes on that consumer spending? picture. That last graph, the percent of the deposit is percent of GDP, rising, rising, rising. But if you look at the chart, what's interesting is it's been, it bottomed out right around

the dot-com crisis, around the peak in 1999. And ever since that, it might actually, and again, some people will debate this, it might actually indicate a propensity for people to save more, be a little less risk savvy or risk-prone. Is this in part when people say there's a lot of cash on the sidelines? This could be, this is cash on the sidelines. And what happens right now is whether or not that cash is deployed for things like investment or consumer spending or whether or not it just moves towards money market funds is a general trend or paradigm. Michael Pettis was just tweeting about this, too, the savings glut among, we always talk about Asian savings to up, U.S. wealthy savings flood as well. Pandemic accelerated that.

Tom, good to have you back in New Jersey. Good to be back in the HQ. Yeah, you bet. All right. Thanks for watching. Power Lunch, everybody.